Catch Yourself If You Ever Say 'This Time Is Different'

When we look at situations we’re always looking for what’s
unique. We should, however, give more thought to similarities.

“This time is different” could be the four most costly words ever
spoken. It’s not the words that are costly so much as the
conclusions they encourage us to draw.

We incorrectly think that differences are more valuable than
similarities.

After all, anyone can see what’s the same, but it takes true
insight to see what’s different, right? We’re all so busy trying
to find differences that we forget to pay attention to what is
the same.

Imagine sitting in a meeting where people are about to make the
same mistake they made last year on the same decision. Let’s say,
for example, Jack has a history of messing up the annual tax
returns. He’s a good guy. He’s nice to everyone. In fact, he buys
everyone awesome Christmas presents. But the last three years —
the period he’s been in charge of tax returns — have been nothing
short of a disaster causing more work for you and your
department.

The assignment for the tax return comes up and Jack is once again
nominated.

Before you have a chance to voice your concerns, one of your
co-workers speaks up: “I know Jack has dropped the ball on this
assignment in the past but I think this time is different. He’s
been working hard to make sure he’s better organized.”

That’s all it takes. Conversation over —
everyone is focused on what’s unique about this time, and it’s
unlikely, despite ample evidence, that you’ll be able to convince
them otherwise.

In part, people want to believe in Jack because he’s a nice guy.
In part, we’re all focused on why this time is different, and
we’ll ignore evidence to the contrary.

Focusing on what’s different makes it easy to forget historical
context. We lose touch with the base rate. We only see the evidence that
supports our view (confirmation bias). We become optimistic and
overconfident.

History provides context. And what history shows us is that no
matter how unique things are today there are a lot of
similarities with the past.

Consider investors and the dotcom bubble. Collectively people saw
this as unprecedented and unique, a massive transformation that
was unparalleled.

That reasoning, combined with a blindness to what was the same
about this situation and previous ones, encouraged us to draw
conclusions that proved costly. We reasoned that everything would
change and everyone who owned internet companies would prosper
and the old non-internet companies would quickly go into
bankruptcy.

All of a sudden profits didn’t matter. Nor did revenue. They
would come in time, we hoped. Market share mattered no matter how
costly it was to acquire.

More than that, if you didn’t buy now you’d miss out. These
companies would take over the world and you’d be left out.

We got so caught up in what was different that we forgot to see
what was the same.

And there were historical parallels: automobiles, radio,
television, and airplanes to name a few. At the time these
innovations completely transformed the world as well. You can
consider them the dotcoms of yesteryear.

And how did these massively transformational industries end up
for investors?

At one time there were allegedly over 70 different auto
manufacturing operations in the United States. Only three of them
survived (and a few of those even required government funds).

If you catch yourself reasoning based on “this time is
different,” remember that you are probably speculating. While you
may be right, odds are, this time is not different. You just
haven’t looked for the similarities.